Commerce was already undergoing a shift towards digital platforms before the spread of the novel coronavirus. That’s why Shopify (NYSE:SHOP) stock posted such strong gains through the years, from under $30 per share in late 2015 to the $500 mark in February 2020.
Today, lockdown orders and stay-at-home mandates have devastated entire sectors of the economy. Yet, Shopify stock has stood firm. Sure, it wobbled in March, but in April, the shares achieved fresh all-time highs.
May 6 is a significant day for Shopify stockholders, since that’s when the company is scheduled to report its first-quarter earnings data. With that in mind, there are reasons to believe that the stock is worth owning as the e-commerce frenzy is here, and it’s here to stay.
The Data Supports Growing Digital Commerce
Shopify’s specific sub-niche in e-commerce makes the company unique. It provides a platform for merchants to sell their goods (and, to a lesser extent, services) online. In other words, Shopify provides a one-stop digital-storefront solution for sellers.
The onset of the coronavirus couldn’t have been predicted. Yet, now that it’s here, SHOP stockholders can benefit from the accompanying rise in e-commerce activity.
Recent data on e-commerce activity fully supports this thesis. Throughout the week that ended on April 6, e-commerce sales increased by 17%, signifying a record-breaking jump at that time. Then the record was broken again during the week ending April 20, when e-commerce sales increased by an astounding 25%.
Believe it or not, from late February to late April, spending on e-commerce increased by a whopping 85%. Sure, some of that is due to the demand for streaming content, video games and cloud-related services.
But there’s also a spike in demand for products in categories such as household care, health and beauty, pet care and baby care. Shopify’s merchants hawk all kinds of wares, so the company is ideally positioned to capitalize on the e-commerce craze.
Will all of this demand suddenly vanish when the intensity of the coronavirus crisis diminishes? Not likely. Yes, people will venture out to malls and shopping centers again. They’ll rekindle their love affair with brick-and-mortar retail outlets.
And, they’ll keep shopping online too. Brick-and-mortar outlets simply can’t offer the convenience and the vast selection that online platforms can. So even when the stay-at-home orders are lifted, Shopify can count on shoppers ordering online and merchants needing a platform with which to ply their trade.
Upping the Ante
Responding to the acceleration in e-commerce activity, Shopify CTO Jean-Michel Lemieux tweeted, “Our platform is now handling Black Friday level traffic every day! It won’t be long before traffic has doubled or more.”
Lemieux’s declaration might strike us as a tad effusive. The analyst community might not have bought into Lemieux’s outlook, either, as it’s predicting an adjusted quarterly loss in revenue of 19 cents per share.
Understated analyst expectations are an earnings-season investor’s best friend. Setting a low bar can make an earnings beat, and therefore higher stock prices, a high probability.
The point is, we don’t have to take Lemieux’s likely hyperbolic tweet literally. To maintain an optimistic outlook on Shopify stock, it’s only necessary to expect reasonably strong growth in a company that’s providing an essential component of the e-commerce business vertical.
To that end, Shopify is upping the ante with its new shopping app, known as Shop. This app powers the full e-shopping cycle from targeted product recommendations to browsing, checkout and package tracking.
The timing is ideal for the Shop app rollout as shoppers increasingly pivot towards digital and particularly app-based platforms. Merchants, naturally, should celebrate Shopify’s proactive move in providing this potentially game-changing app.
The Final Word on Shopify Stock
Even before the stay-at-home orders, and even before the unveiling of the new app, Shopify stock was worth our attention. Today, the stock is a strong buy as e-commerce takes center stage among global shopping phenomena.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.